Williams Alligator and fractals
When the Alligator's three lines open and separate, a trend has started. Enter on a fractal breakout in that direction.
Try Williams Alligator and fractals on a real day
A real market day with the date hidden. Run the checklist on the chart, then buy, sell or stay out: the real candles answer.
Check every point of the list before you decide. Stay out if the setup is not there.
Bill Williams introduced the Alligator and fractals in "Trading Chaos" (1995). The Alligator is three smoothed moving averages shifted into the future: the jaw (13 periods, shifted 8), the teeth (8, shifted 5) and the lips (5, shifted 3).
Why it works
When the three lines are intertwined, the "alligator is sleeping": the market ranges. When they open in order, it is "eating": a trend is under way.
A fractal is a five-bar pattern with a high (or low) above (below) the two bars on each side. A break of an up fractal above the teeth is the entry signal.
The rules
Setup
- Alligator lines open in order: lips above teeth above jaw (for longs).
- An up fractal forms above the teeth.
Entry
- Buy stop one tick above the up fractal.
Stop loss
- Below the most recent down fractal, or below the jaw.
Exit and management
- Trail the stop under each new down fractal; exit if price closes below the teeth.
Filters that improve it
- Skip fractals while the lines are intertwined.
Worked example
Illustrative EUR/USD example on 4H: the lines open upward. An up fractal forms at 1.0880 above the teeth at 1.0850. A buy stop at 1.0882 triggers; stop at the last down fractal, 1.0835. The stop follows new fractals up to 1.0950.
Illustrative numbers, not a recommendation.
Common mistakes
- Trading fractals when the alligator is asleep.
- Using the unshifted moving averages, which changes the indicator.
How to practise it
In Candlemind write three smoothed averages in My indicators (rma(close, 13), rma(close, 8) and rma(close, 5)), mark fractals by eye and only take breakouts when the lines are clearly fanned out.
Pre-trade checklist
- Lines open in order
- Fractal above the teeth
- Buy stop above the fractal
- Stop at the last opposite fractal
- Trail with new fractals
Frequently asked questions
What are the Alligator settings?
Jaw: 13-period smoothed average shifted 8 bars; teeth: 8 shifted 5; lips: 5 shifted 3.
What is a fractal in trading?
A five-bar pattern where the middle bar has the highest high (or lowest low) of the five.